Michael Rothenberg, VC Who Was Parodied on HBO, Charged With Fraud

(Bloomberg) -- Michael Rothenberg, a once-high-flying venture capitalist whose firm inspired a memorable scene in HBO’s “Silicon Valley,” was charged with having defrauded his investors of at least $18.8 million from 2013 to 2016.

According to federal prosecutors in San Francisco, Rothenberg raised millions telling investors he would use it to back promising startups but actually kept a large portion of the money for his personal use. The government also claims Rothenberg defrauded banks by lying about his wealth to obtain loans, sinking some of the money into his investment funds. Rothenberg didn’t respond to a request for comment.

Rothenberg threw flashy events for his VC firm that were a subject of gossip among the tech set. One event, held at the ballpark where the San Francisco Giants play, served as a basis for a scene in the HBO comedy.

This isn’t the investor’s first brush with the law. In July 2016, a whistle-blower at the firm shared information with the Securities and Exchange Commission allegedly showing Rothenberg used clients’ money for unintended purposes. Rothenberg agreed to be barred from the securities industry for five years as part of a deal with the SEC.

The Justice Department said that in 2015, Rothenberg took excess fees from the company’s fund and failed to report the move to investors. Rothenberg then made false statements to a bank to receive a $4 million line of credit and replace the money in the fund, prosecutors said.

The U.S. Attorney’s complaint said that in July 2016, five investors wired Rothenberg $1.35 million to purchase stock in a privately held software company. Rothenberg didn’t purchase the stock and instead used the investors’ money “for many purposes,” according to a statement Friday from the U.S. Attorney’s office for the Northern District of California.

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